Large unincorporated associations such as charities, clubs or societies, that were not considered eligible for help over lost deposits following the collapse of Kaupthing Singer and Friedlander Bank (KSF) and Landsbanki Islands hf in 2008, may now be entitled to compensation from the Financial Conduct Authority (FCA) it was confirmed today.
Those organisations that had deposits may now be entitled to payments from the FCA to compensate for their losses up to £50,000. The Financial Services Compensation Scheme (FSCS) will begin contacting the organisations concerned who could be eligible for help.
The FCA also said that it was possible some unincorporated associations and large partnerships may also be entitled to compensation payments for investments following the past failure of investment firms.
The FCA director of policy risk and research, Christopher Woolard, said:
"Once it became clear that some organisations may have missed out on compensation, we acted to put that right and are now saying to anybody that thinks it may be eligible for help to get in touch with the FSCS."
When the Financial Services Authority transposed the original rules, large unincorporated associations and certain large partnerships were excluded from compensation for investments. The FCA is not aware that any claims were wrongly rejected, but it will consider claims from claimants who believe they may be eligible for help.
The FCA also said it would be consulting on proposals to extend eligibility for FSCS compensation to all unincorporated associations and to certain large partnerships if an investment firm fails.
The size cut-off for partnerships being eligible to claim will change from net assets not exceeding £1.4 million to the higher size limit that applies to companies. Broadly, partnerships will be able to claim on the FSCS if they do not exceed two of the three criteria: turnover £6.5million, balance sheet total £3.26 million and 50 employees.
This would mean such organisations have the same protection as other consumers with similar investment claims.
The FCA estimates these changes would apply to 5,000 associations and 24,000 partnerships. At present, the FSCS provides compensation up to £50,000 for investment claims.
These changes are part of the FCA’s objective to secure an appropriate level of protection for consumers. The rule changes for future investment firm failures and the redress for past failures are to meet requirements under EU law.
Alongside the FCA consultation, the Prudential Regulation Authority (PRA) is consulting on proposals to clarify the compensation rules for deposits so that in the future all unincorporated associations, regardless of size, are within the scope of FSCS cover for deposits.
Notes to Editors
- Anyone who thinks they were an unincorporated association or partnership that was denied compensation for investments or deposits because of its size should contact the FSCS on 0800 678 100 or 020 7741 4100.
- The FSCS is the UK's compensation fund of last resort for customers of authorised financial services firms. It may pay compensation if a firm is unable, or likely to be unable, to pay claims against it. This is usually because it has stopped trading or has been declared in default.
- The consultation paper Financial Services Compensation Scheme – unincorporated associations and partnerships.
- There will be a four week consultation period which will close on 30 October 2013.
- PRA’s consultation ‘Occasional Consultation Paper’, the relevant chapter is Chapter 5.
- On the 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.